A self-managed super fund (SMSF) can be a useful tool for utilising funds that would otherwise be held in an industry super fund. As per your accountant’s advice, you may use those funds to invest in a managed fund or invest in property at your own discretion. When it comes to using your SMSF for purchasing your practice premises, Credabl has experience working with industry professionals such as financial planners, accountants and lawyers to make it happen.
We sat down with Credabl Finance Specialist Ali Joyce, to understand more about the process of utilising your SMSF to purchase your practice premises. We’ll cover how an SMSF can be useful for debt management, include a case study and outline who you might need to partner during the process.
Purchasing property through an SMSF avoids the need to use personal cash or business funds for stamp duty, deposits and other setup costs. This is particularly valuable for clients setting up a new business, as maintaining cash flow is crucial. As Ali advises, by utilising funds already available in their super, clients can focus their personal and business funds on other essential aspects of setting up the new practice. These aspects could include marketing expenses or maintaining a contingency fund, which will provide peace of mind during the setup or relocation of a business.
Ali explains that debt management is essentially a method of converting non-deductible personal debt into debt that is tax efficient. In relation to an SMSF, this means you can restructure where your debt sits with the help of your accountant, financial adviser and lawyer. Credabl can work with your team of professionals to facilitate this process by providing finance to leverage your SMSF effectively.
To illustrate how your SMSF can be used for debt management, Ali provides an example where she recently worked with a dentist who owned both commercial property and personal property, with debt on both. By selling the commercial property to their SMSF at market value, they were able to use the funds reallocated in this process to pay off their personal home loan. This approach effectively converted non-tax-deductible debt into tax-deductible debt within the SMSF, offering multiple tax advantages.
In this example, the dentist had a home loan debt of $500,000 which was not tax-deductible and a commercial property worth $1 million, also with an existing debt of $500,000. In this instance, they sold their commercial property to their SMSF for market value ($1 million), meaning the SMSF essentially “purchased” the commercial property. Thanks to our ability to offer up to a 90% lend for practice premises, only $200,000 was required in the SMSF to cover the 10% deposit required ($100,000), stamp duty (if it's applicable) and any fees like valuation fees or legal fees. At settlement, the payout of $1 million paid off the home loan debt of $500,000, with the remaining funds from the sale allocated against the commercial property debt. This process converted the dentist’s assets and debt into a more favourable tax position, with their existing debt being tax-deductible.
Working closely with financial planners, accountants and lawyers who specialise in your industry is essential. At Credabl, we have an extensive network of professional partners and can assist by introducing you to these specialists if you don’t already have them. Together, we can educate and guide you through the practice premise purchase process.
Partnering with Credabl means accessing a team that specialises in medical finance and connecting you with the right professionals. Ali points out that our expertise in SMSF lending and our tailored financial solutions make us an ideal partner for securing your practice premises. Whether you need assistance with using your SMSF for practice premise purchases or exploring financing options, Credabl is here to help.
To take the next step in managing your debt effectively through an SMSF, or speak to Ali or any of our Credabl consultants on 1300 27 33 22.
Disclaimer
This article is a guide only and does not constitute any recommendation on behalf of Credabl Pty Ltd (ACN 615 968 100) or any of its related bodies corporate (Credabl). The information in this article is general in nature and we have not taken into account your personal objectives or financial circumstances or needs when preparing it. Before acting on this information you should consider if it is suitable for your personal circumstances. Credabl is not offering financial, tax or legal advice. You should obtain independent financial, tax and legal advice as appropriate.
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